Abstract

http://ssrn.com/abstract=505965
 
 

References (23)



 
 

Citations (8)



 


 



Netting, Financial Contracts, and Banks: The Economic Implications


William J Bergman


Federal Reserve Bank of Chicago - Research Department

Robert R. Bliss


Wake Forest University - Schools of Business

Christian A. Johnson


University of Utah College of Law

George G. Kaufman


Loyola University Chicago

January 2004

FRB of Chicago Working Paper No. 2004-02

Abstract:     
Derivatives and certain other off-balance sheet contracts enjoy special legal protection on insolvent counterparties through a process referred to as close-out netting. This paper explores the legal status and economic implications of this protection. While this protection benefits major derivatives dealers and derivatives markets, it is less clear that other market participants or markets in general are better or worse off. While we are not able to conclude whether or not these protections are socially optimal, we outline the wide range of issues that a general consideration of the pros and cons of netting protection should take into cognizance, and analyze some of these issues critically. Ultimately the question becomes one of quantifying complex trade-offs.

Number of Pages in PDF File: 45

JEL Classification: K23, K41, G28


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Date posted: February 24, 2004  

Suggested Citation

Bergman, William J and Bliss, Robert R. and Johnson, Christian A. and Kaufman, George G., Netting, Financial Contracts, and Banks: The Economic Implications (January 2004). FRB of Chicago Working Paper No. 2004-02. Available at SSRN: http://ssrn.com/abstract=505965 or http://dx.doi.org/10.2139/ssrn.505965

Contact Information

William J Bergman (Contact Author)
Federal Reserve Bank of Chicago - Research Department ( email )
230 South LaSalle Street
Chicago, IL 60604
United States
Robert R. Bliss
Wake Forest University - Schools of Business ( email )
P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-5957 (Phone)
336-758-6133 (Fax)
Christian A. Johnson
University of Utah College of Law ( email )
332 S. 1400 East Front
Salt Lake City, UT 84112-0730
United States

George G. Kaufman
Loyola University Chicago ( email )
820 North Michigan Avenue
School of Business
Chicago, IL 60611
United States
312-915-7075 (Phone)
312-915-8508 (Fax)
HOME PAGE: http://www.luc.edu/faculty/gkaufma/
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